Causality between Economic Growth and Health Expenditure: A time series analysis from 1996 till 2017 in Albania

Abstract

-Evidence shows that human capital is a leading driver and one of the most important factors affecting economic development. Economic growth models emphasize the effect that human capital has on the growth and prosperity of a country. The indicators used to measure human capital vary. In this article we will use total health expenditure as a measure for human capital. A healthier population will obviously lead to increased productivity and consequently a higher income for the individual. By increasing public health investments, the workforce will potentially be healthier and consequently human productivity will increase. One of the most important lessons to be learned from the coronavirus pandemic is the importance of investments in health care services, human resources and technical infrastructure for the economy. The aim of this article is to study the relationship between Health Care Expenditure (HCE) per capita and Gross Domestic Product GDP per capita in Albania. The data (in $) is taken from the World Health Organization website, for the time period 1996-2017. The methods used are the ARDL Bounds testing approach for co-integration and the Granger causality test. The main results are: the variables per capita GDP and per capita HCE are not cointegrated. The ARDL(1,1) model estimation points out the positive relationship between the two variables. Also, our study confirms the existence of joint causality between per capita GDP and per capita HCE.